Backdating digital river
United Health declined to comment for this story, and Digital River did not return a call seeking comment. Paul-based Travelers said in July that it had received 19 DO claims related to the backdating of stock options. Paul Travelers is the primary insurer on only one of those claims, and executives don’t expect the claims to contribute to any significant losses.“I think in total (the backdating issue) will not have a material impact on our (industry) but companies that are smack dab in the middle of it, they’ll have significant issues relative to cost,” Lamendola said.showed that many firms may not have filed properly options timing paperwork as recently as 2005.“We believe the backdating scandal may be entering its second act,” Glass Lewis analyst Todd Fernandez said in the report. Securities and Exchange Commission required companies to disclose their stock-option awards in Form 4 filings within two days of options grants to comply with Sarbanes-Oxley.Investors have widely discounted companies’ misconduct over stock options timing because they believe most of it pre-dates the Sarbanes-Oxley reforms on corporate governance of 2002 that were implemented in the wake of the Enron scandal.But a report released over the weekend from proxy advisory firm Glass Lewis & Co.This trend alone could provoke an industrywide adjustment in DO premiums. Stock options offer the holder the opportunity to buy a stock at a fixed price and then sell it at a gain if the stock rises.
Backdating stock-option grants isn’t illegal if disclosed.The average public company paid 7,282 in DO premiums in 2005, but an individual company’s premiums can vary widely from the average.For example, companies with a market cap of more than billion may be paying premiums in the .8 million range, said Michael Turk, a senior consultant with Tillinghast.Premiums on directors’ and officers’ liability insurance, also known as DO insurance, soared in 20 after the Enron and World Com scandals.But they’ve since come down as litigation related to those problems worked its way through the courts and the number of lawsuits that trigger DO insurance claims declined.